Key Challenges for Supply Chain Risk Management in Healthcare
The volatility of the global supply chain and its impact on the healthcare industry has dominated our news feeds since the onset of the pandemic when hospitals and medical care facilities across the nation raced to find the supplies they needed to treat patients. While we may now be in a “post-pandemic” time, the era underscored the importance of implementing risk management measures to create more resilient supply chains.
From construction sites to restaurants, virtually every industry has experienced disruptions because of global supply chain issues. But the healthcare industry was hit particularly hard. As the third-largest industry in the United States that accounts for almost 20% of the nation’s gross domestic product (GDP)—the healthcare industry spans many areas, including emergency, preventive, palliative, curative, and rehabilitative care. Healthcare supply chain risk management is a life-or-death issue. Transparency into where supplies are sourced, the validation of third parties, the guarantee of appropriate transportation and prompt, secure delivery of materials—all play a critical role in ensuring the efficacy of healthcare organizations and mitigating fatalities.
In this article, we’ll discuss the key challenges for supply chain risk management (SCRM) in the healthcare industry—and the solutions available.
Lessons Learned from COVID-19 on the Healthcare Supply Chain
The fragility of the healthcare supply chain was spotlighted on a global stage during the pandemic. Since the U.S. heavily depends on other countries for medical supplies, widespread shortages in everything from testing swabs imported from Italy to personal protection equipment (PPE) imported from Asia wreaked havoc on the healthcare industry. As Vice President of Supply Chain Risk Management for Exiger Government Solutions Tim Stone put it, “the healthcare sector supply chain is global, it’s complex, and it’s pretty fragile.”
This is compounded by several other threats at work. Abuse, fraud, cybersecurity attacks, and exploitations of supply chain weaknesses highlight the need for technology that can leverage AI to illuminate supply chain risk. Designed to provide real-time awareness and a complete picture of the extensive and complex supply chain, SCRM technology can recognize, validate, and investigate adverse events and potential risks on a global scale. It helps to safeguard the healthcare industry from experiencing the chaos it encountered during the peak of the pandemic—and ultimately, improves patient care and safety.
Read on to explore lessons learned from COVID-19 pandemic response and how it has shaped risk management plans.
Overdependence on Entities and Foreign States
One of the most significant lessons learned during and in the wake of the pandemic was the overdependence the U.S. has on entities and foreign states for its healthcare necessities.
The Cornell Healthcare Review reports that in 2020, “almost all medical protection supplies in the U.S. were made in other countries, and when global supply chains fractured, U.S. manufacturers were left to try to fill the gaping supply holes and switch from manufacturing other products to medically relevant ones.” This left the U.S. healthcare industry in a vulnerable state.
Stone states that one of the problems with relying on entities and foreign states is that they prioritize “their own national interest above open trade.” This is particularly true of China, which dominated exportation of PPE. The U.S. also depends on China for “pharmaceutical intermediates and active pharmaceutical ingredients—basically, the building blocks for the drugs that we all rely on,” Stone says.
As a result of our overdependence on exports from China, the U.S. has faced an increased Foreign Ownership, Control, or Influence (FOCI) risk.
The healthcare industry’s dependence on India for generic medications was also revealed during the pandemic, and the healthcare supply chain was further complicated when reports surfaced that India’s supply chain is ultimately controlled by China. Meanwhile, supply chain disruptions in Malaysia, which were exacerbated by COVID-19 outbreaks, reduced the U.S.’s capacity to—literally—get their hands on nitrogen gloves.
To counter this, Exiger’s technology platform assesses risk factors and analyzes complications in the supply chain to help healthcare organizations with managing risk.
Limitations on Just-in-time Inventory Management
The need for N95 masks surged at the start of the pandemic, in large part to help protect healthcare providers from exposure to COVID-19 as they administered to patients. Prior to the pandemic, China generated almost 50% of the world’s supply of masks, but China’s national interests, combined with outbreaks throughout the country that hindered mask production, left the U.S. healthcare industry scrambling to shield its workers, ensure patient safety, and administer safe patient care.
For Stone, this illuminated the limitations on just-in-time inventory management—or a process that limits bringing in non-strategic commodities from suppliers to avoid waste and to save on storage.
“We saw demand just totally outstripped supply,” he said. “There was a competition for resources, even within the U.S. government, between the federal government, state agencies, and local agencies. Suddenly, [masks] were strategically vital and it was like the Wild West. There was hoarding, profiteering, gray markets, fraudsters, and counterfeiters trying to exploit this tremendous demand.”
Lack of Supply Chain Visibility
Ultimately, the N95 mask debacle, among other critical challenges, revealed the lack of supply chain visibility.
The lack of visibility and transparency within the supply chain—during the heat of the pandemic and in the present—underlines the fact that healthcare organizations need to identify their suppliers and their suppliers’ suppliers and on until the entire chain is seen and comprehended. Part of this comes down to legal reasons—cargo can be turned away if they aren’t fully compliant, which further disrupts the supply chain and the delivery of goods. It also comes down to consumer concerns with the supply chain and increasing initiatives to combat inhumane practices, such as the use of modern slavery. This impacts an organization’s reputation, which is vital to stakeholders. But it’s primarily about safeguarding patient care. If a medication arrives from a fraudulent manufacturer, patient safety is compromised—and may result in a fatality.
This was magnified during the pandemic as we struggled to get vaccines and PPE. As Stone puts it, “We need to prepare for the next black swan event. We are basically going from one global crisis to the next. Companies, organizations, and the government need to understand where they are ultimately sourcing their goods, not just one rung up. You need to know if all your vendors are sourcing from the same state-owned enterprise or some sprawling Chinese metropolis. You can’t mitigate risk without knowing it.”
One of the solutions to this is developing and adopting supply chain risk management software to glean actionable insights. Exiger supported the Joint Acquisition Task Force (JATF) to illuminate 26 previously unknown critical global medical supply sectors, then rapidly vetted over 11,000 potential critical medical suppliers in just six weeks.
Vetting and continuously monitoring vendors is due diligence, while insights can help healthcare organizations ensure they have the supplies needed for an emergency—and information on potential risks. DDIQ, for example, provides a full picture of one’s supply chain and its dynamic risks.
Item-level visibility is also imperative to safeguard the quality of medical ingredients and to ensure they comply with sanctions like UFLPA. Exiger’s acquisition of Supply Dynamics—the most advanced platform for mapping, tracking, and timing the purchase of subcontracted goods–brings a new level of granularity to supply chain management and supply chain risk management.
Risk Management Strategies for Healthcare Facilities
As we learned from the pandemic, implementing risk management strategies for healthcare facilities is imperative.
Improving Technology in Healthcare Supply Chain Risk Management
TRADES is a supply chain risk management framework conceived by Exiger that emphasizes the importance of transparency and risk methodology to shape risk management plans and glean insights into supply chain vulnerabilities. By visualizing one’s entire supplier ecosystem, including all tiers of vendors and distributors, risk management professionals can identify and mitigate vulnerabilities before they turn catastrophic.
Due to the large amounts of data needed to analyze an entire supply chain, technology is critical.
Simplify Due Diligence in Your Supply Chain with Exiger
Healthcare organizations have plenty to gain with the use of Exiger’s Supply Chain Risk Management software. Supply Chain Explorer enables healthcare organizations to swiftly and accurately view every tier of their supply chain and surface risks that need to be addressed, while the Supply Dynamics platform provides the ability to conduct parts-level visibility assessments. Contact us today to see how these tools can help to protect your healthcare supply chain.